Analysts Pessimistic About Pentagon Contraction

If last year's budget was tough on the U.S. defense establishment, the coming year is likely to bring more of the same.

The budget for fiscal 2013 was only recently solidified by Congress. The president's budget request is two months behind schedule, while lawmakers are nowhere near an agreement on how to reconcile their own big-picture spending issues. That leaves the Pentagon stuck with a $46 billion bill this year and a similar cut next year unless Congress finds a way to reconcile its long-standing differences over taxes and entitlements. Early reports indicate that soon-to-be presented budget plans for fiscal 2014 will not encompass those reductions.

The situation has defense analysts in Washington in agreement on a couple of things: The military is in the midst of a cyclical downturn in defense spending; and they are skeptical about the Pentagon's ability to navigate it.

For starters, budget cuts driven either by the penalty known as sequestration or a possible agreement to avert it are already prompting a review of the president's 2012 shift in strategy that saw the U.S. military pivoting from Europe to Asia.

That review is due at the end of May, and Gen. Martin Dempsey, chairman of the Joint Chiefs of Staff, is already adjusting the nation's expectations. “We'll need to relook at our assumptions, and we'll need to adjust our ambitions to match our abilities,” Dempsey said during a recent speech at the Center for Strategic and International Studies. “And that means doing less, but not doing less well.”

That overview—the “Strategic Choices and Management Review”—is supposed to inform next year's Quadrennial Defense Review and the fiscal 2015 budget, says Todd Harrison of the Center for Strategic and Budgetary Assessments.

But that review, if it contradicts what is released in the administration's budget request to Congress, expected in April, might render that very request obsolete, Harrison says. It will be based on the 2012 strategy, but it is not likely to align with the new strategic choices stance.

On top of that, the fiscal 2014 request for defense may be $50 billion more than spending levels prescribed by the law that put sequestration into play. “Which means it is arguably irrelevant anyway unless budget caps are raised,” Harrison says.

Sequestration represents close to an 8% cut in the Pentagon's budget for fiscal 2013. Because the majority of cuts occur in the first 2-3 years, if the cuts remain in place through 2014, “it would be quite a turnaround” for the Pentagon, Amy Belasco of the Congressional Research Service said during a recent Project on Defense Alternatives panel discussion.

To manage the drawdown well, Defense Secretary Chuck Hagel will require the president's support to break the historic balance of spending among the services and rein in escalating military pay, benefits and compensation, says Gordon Adams, a government official who helped manage the post-Cold War drawdown of the 1990s. He says: “If the first guideline [for the strategic review] isn't, 'give me options for limited budgets,' Hagel will be making a big mistake. And, “I'm not optimistic that will happen.”

Without setting priorities, acquisition dollars and military force structure will be reduced, while the Pentagon bureaucracy will protect itself.

And that means major programs such as the F-35 Joint Strike Fighter—the Pentagon's costliest weapon—will receive “the contradictory direction of stretch and shrink” by reducing the number of purchases per year as well as the size of the overall fleet. That will keep the JSF alive, in contrast to the other 60% of the acquisition budget that have less visibility, Adams says.

Going forward, however, affording the JSF amid other priority programs—including the Air Force's long-range bomber and the KC-46A aerial refueling tanker—will remain difficult.

And trade-offs on what to cut and what to keep will have to wend their way through Capitol Hill, where lawmakers remain as consumed with parochial interests as ever. There, agreement to cut specific programs remains unpopular. So too do other means of managing a drawdown. Lawmakers already held a hearing to register their disdain for the base realignment and closure process that the president recommended last year and which will likely help commanders manage a shrinking force structure. With the war in Afghanistan still ongoing, reforms to military pay and benefits remain unlikely.

But that is what the Pentagon is pleading for. “We need the help of our elected officials to give us the certainty, the flexibility and the time to make change. If we can get the reforms to pay and compensation . . . and if we can get rid of weapons and infrastructure we don't need, then we can begin to restore the versatility of the Joint Force at [an] affordable and sustainable cost,” Dempsey says.